Passive ETF

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DEFINITION of 'Passive ETF'

One of two types of exchange-traded funds (ETFs) available for investors. Passive ETFs are index funds that track a specific benchmark, such as a SPDR. Unlike actively managed ETFs, passive ETFs are not managed by a fund manager on a daily basis.

BREAKING DOWN 'Passive ETF'

Passive ETFs are similar to unit investment trusts (UITs) in that their portfolios are reset at regular intervals. They do not generate internal capital gains like actively-managed funds. However, they differ from UITs in that they can be bought and sold on an intraday basis. Passive ETFs will typically have much lower fees than those associated with their actively-managed counterparts.

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